Un Iv. ©fill.  Library 


51 
34Z7 


TRAFFIC  TJISriTY, 


Oak  Street POPULARLY  CALLED 

UNCLASSIFIED 


“RAILWAY  POOLS,” 


GK  BLATTOH:AE;D 


REPRINTED  FROM  THE  CHICAGO  RAILWAY  REVIEW 


NEW  YORK: 

MARTIN  B.  BROWN,  PRINTER  AND  STATIONER, 
Nos.  49  and  51  Park  Place, 

1884* 


TEAFFIC  UNITY,  POPULAELY  TEEMED  “ EAIL- 
WAY  POOLS.” 


Editor  Chicago  Railway  Review  : 

The  prevailing  misconception  of  “ pools,”  more  among  people 
at  large,  than  the  railway  patrons  most  interested  in  their  actual 
purposes  scope  and  effects,  is  that  they  are  combinations  of  rival 
railways  to  enforce  excessive  charges,  to  put  all  the  receipts  from 
parallel  traffic  into  a joint  purse,  and  arbitrarily  share  its  contents  ; 
and  that  for  these  and  other  reasons  they  should  he  declared 
unlawful.  On  this  question  Mr.  L.  E.  Chittenden,  an  able  oppo- 
nent of  the  railways,  said  to  a Congressional  Committee,  January 
29,  of  this  year : 

“A  contract  betiveen  companies  to  establish  rates  is  not  a pool - 
“ ing  contract.  The  pooling  element  is  when  you  bring  the 
“ earnings  of  all  these  roads  into  a common  fund  and  divide  them, 
“ not  according  to  the  service  performed,  but  by  some  other  rule, 
“ which  * * * * must  involve,  somewhere  in  its  opera- 

“ tion,  unreasonable  rates.” 

If  rates  are  alike  under  “ contracts  ” and  “ pools,”  and  reason- 
able under  both,  then  hostility  to  “ pools  ” is  hostility  to  any 
established  rates,  and  to  antagonize  traffic  unity  and  proper 
divisions  of  tonnage  or  revenues  between  the  carriers  alone  in- 
volved, is  merely  to  antagonize  any  equitable  plan  for  maintain- 
ing established  reasonable  rates. 

Eates  have  for  years  been  made  without  “ pools,”  and  must 
continue  to  be,  whether  “ pools ” exist  or  not,  and  no  “pool” 
would  now  be  required  if  the  reasonable  rates  made  by  other 
necessary  and  public  methods  were  observed  in  good  faith. 


q 


I demur,  however,  to  calling  the  freight  federations  that 
have  the  widest  publicity  by  the  name  of  “ pools,”  although 
in  deference  to  usage  and  brevity  I shall  often  use  that 
term  herein.  Popularly  applied  the  phrase  means  conceal- 
ment, trickery,  and  chance,  like  pools  sold  on  horse  races, 
or  blind  pools  in  stocks,  as  distinguished  from  the  frank- 
ness and  certainty  intended  by  the  railways.  They  are  really 
co-operative  associations,  by  which  both  parallel  and  connecting 
railways  secure  and  divide  the  aggregate  tonnages  of  cities  or 
districts  at  reasonable,  competitive,  and  stable  rates,  in  the  same 
proportions,  as  near  as  arbitration  can  decide  them,  in  which  the 
public  has  divided  its  like  tonnage  between  the  same  railways 
through  long  continuing  prior  periods,  at  equal  rates. 

They  are  the  equalizing  machinery,  or  fly-wheels  of  rates,  to 
secure  non-preferential,  and  therefore  legal , charges,  which 
the  common,  statute  and  commercial  law  requires  of  rail- 
ways as  common  carriers  for  the  public  interest,  as  against  other 
railways,  localities  and  forwarders  that  would  make  them  unequal^ 
preferential  and  discriminating  and  therefore  illegal.  Beyond 
this  they  are  the  railway  ordinances  and  sheriffs  that  prescribe 
. justice  and  preserve  order  and  compel  the  return  at  its  full 
value  to  the  honest  railway,  of  traffic  stolen  by  deception,  if  the 
theft  cannot  first  be  prevented, 

SOME  FORM  OF  AGREEMENT  UPON  RATES  NECESSARY. 

That  rates  must  be  established  by  some  form  of  agreement  is 
more  a public  than  a railway  necessity,  because  railways  can  make 
and  change  rates  without  conference  with  forwarders,  but  for- 
warders must  know  from  the  railways,  the  rates,  conditions,  classifi- 
cations, etc.,  to  which  they  are  subject. 

What  chaos  would  overwhelm  trade  at  Chicago,  for  example,  if 
every  railway  made  its  own  antagonistic  rates,  conditions  and 
penalties,  independently  of  its  rivals,  between  that  city  and  the 
myriad  points  they  all  reach.  There  would  be  no  mercantile 
certainties  ; and  the  inequalities,  discriminations  against  people 
and  districts,  and  the  fortunes,  failures,  etc.,  which  would  follow, 
would  clearly  be  no  less  if  one  gigantic  corporation  managed 
every  railway  from  Chicago  and  made  different  rates  for  each 


forwarder  or  point  at  its  uncontrolled  prejudice  and  will,  than 
if  twenty  railways  did  the  same  thing. 

If  this  supposititious  condition  existed  everywhere,  the  conse- 
quent confusion  of  national  trade  under  non-agreed  rates  would 
compel  legislation,  if  railway  uniformity,  unity,  inter-depen- 
dence and  publicity,  as  commercial  essentials,  could  not  be  other- 
wise secured.  Commerce  now  uses  the  railways  so  much,  that 
trade  equality  is  based  upon  equal  railway  rates ; the  public 
therefore  has  a right  to  ask  equality  of  charges  under  equal  condi- 
tions from  all  competing  railways,  and  logically  the  railways  must 
ask  it  of  each  other.  If  a railway  factiously  declines  such  fair  and 
requisite  unity  and  parity,  it  contemplates  some  wrong  against  a 
competitor  or  the  public,  and  although  it  may  do  like  or  greater 
wrongs  if  it  does  agree  to  them,  it  will  more  certainly  disturb  those 
harmonious  conditions  if  it  declines  to  make  proper  agreements. 

Attempts  were  formerly  made,  to  secure  a semblance  of  this 
desirable  railway  unity  and  public  parity,  by  isolated  and  diverse 
action  in  various  cities  and  States,  but  they  failed — as  they  must 
always  fail — from  want  of  uniform  action. 

A rail  carrier  from  Baltimore  then  made  rates  too  much  below 
those  from  New  York  and  regardless  of  the  latter’s  personal, 
mercantile,  or  geographical  rights.  Philadelphia  railways  did 
the  same  in  its  behalf  as  opposed  to  New  York  and  Boston,  and 
Boston  sometimes  defended  itself  by  making  rates  lower  than 
from  New  York.  In  guarding  its  coffee  imports  against  diversion 
to  New  Orleans,  Baltimore  rated  that  particular  article  without 
reference  to  the  harm  that  might  result  at  New  York  ; and  Phil- 
adelphia in  attempting  to  grasp  a larger  sugar  trade  by  special 
rates,  injured  the  same  interest  everywhere  else  at  the  seaboard. 
St.  Louis  railways  made  rates  to  divert  the  traffic  of  Chicago, 
and  Chicago  railways  in  defense  and  retaliation,  made  rates  that 
bore  no  fair  geographical  or  trade  relation  to  St.  Louis,  and 
therefore  hurt  Peoria,  Indianapolis  and  other  points,  whose  rates, 
like  houses  of  cards,  went  down  one  by  one  with  the 
blow  that  touched  only  the  first.  Each  city  enlisted  its  strongest 
railway  in  a special  crusade  in  its  behalf,  regardless  of  the  rights 
of  others  or  the  general  interest.  Classifications  differed,  conceal- 
ments thrived  and  jealousies  of  railways  and  localities  grew, 


4 


because,  instead  of  being  stimulated  to  harmony,  they  were  thus 
urged  to  discord.  There  was  no  central  organization  to  procure 
evidence,  condense  and  tabulate  facts,  dissipate  rumors,  stimulate 
fair  dealing,  correct  wrong,  promote  uniformity,  reconcile  differ- 
ences or  nationalize  some  good  system  to  those  ends. 

DISCORD  UNDER  THE  OLD  SYSTEM  OF  RATES. 

Great  public  wrongs  and  mercantile  discord  unquestion- 
ably resulted  from  the  foregoing  counter-action,  and  also  from 
the  attempts  of  older  railways  to  prevent  new  ones  from 
securing  traffic  in  what  the  older  arbitrarily  regarded  as 
either  due  or  undue  proportions,  and  in  the  equally  arbitrary 
determination  of  the  newer  roads  to  maintain  their  rights.  In 
these  latter  aims,  each  railway  enlisted  a set  of  business  cham- 
pions, called  “ our  shippers,”  who  in  return  for  their  business 
were  fed  on  palatable  drawbacks,  preferential  car  supply,  free 
passes,  etc.  Merchants  with  the  largest  resources,  and  needing 
the  least  aid,  were  usually  the  chosen  beneficiaries.  The  conces- 
sions paid  to  their  tonnage  and  influence  farther  increased  their 
capital  and  resources,  until  they  became  the  preferential  patrons 
of  railways  that  should  have  been  common  carriers,  and  seized 
the  traffic  of  other  firms  or  deterred  new  ones  from  being  estab- 
lished. The  localities  of  these  contests  became  centers  that 
unduly  absorbed  the  smaller  tonnages  of  adjacent  towns,  lower 
rates  often  ensued  at  the  railway  junctions  than  at  near  by  local 
points,  and  this  brief  epitome  was  repeated  in  far  too  many  in- 
stances. 

The  gainers  could  only  be  a few  preferred  forwarders  and 
localities,  or  a powerful  railway,  but  the  losers  were  the  mercantile 
and  investing  publics,  needlessly  wronged  by  wasteful  losses  and 
unjust  preferences.  I do  not  say  such  has  been  the  railway  rule, 
but  I am  stating  plainly  causes  that  led  to  many  wrongs.  In  a 
majority  of  such  struggles  no  doubt  current  “agreements  on  rates, 
which  is  not  pooling,”  were  frequently  made,  broken,  renewed, 
again  shattered,  made  tighter  with  some  whereases  and  resolvesr 
and  then  broken  again  by  a fight  in  which  yet  lower  freight  rates 
prevailed,  and  more  persons  and  localities  were  harmed.  The 
newei  or  older,  or  poorer  or  richer,  or  shorter  or  longer  railways 
as  cases  might  differ,  tried  to  injure  others  or  “ their  shippers,”  as 


0 


excuses  or  policies  actuated  tliem.  Sometimes  it  was  the  weak 
struggling  for  traffic  and  genteelly  blackmailing  the  strong, 
sometimes  it  was  the  stronger  trying  to  crush  the  weaker  new- 
comer by  forcing  rates  “ to  the  bottom,”  etc.  Each  forwarder  so 
gained,  was  a questionable  triumph  of  one  firm  and  some  gross 
dollars  if  there  were  no  net  earnings.  Some  forwarders,  anxious 
to  force  their  own  profits,  often  used  dishonorable  means  to  that 
end.  The  more  formal  railway  contract  usually  ensued  from 
this  bitterness  ; better  faith,  perchance  ; often  higher  rates  to  com- 
pensate for  prior  folly  and  losses;  trade  resumed  more  normal 
railway  as  well  as  public  conditions ; and  all  this  was, 
perhaps,  followed  again  by  a renewal  of  a similar  contest. 
This  is  a true  if  humiliating  silhouette  of  railway  folly, 
and  represents  what  the  modern  transportation  reformer  calls 
competition,  and  desires  to  perpetuate,  but  which  is  really  railway 
assassination  and  unjust  discrimination,  which  should  be  legally 
stopped  or  punished. 

The  wrongs  the  public  has  suffered  from  such  railway  impolicy 
are  now  too  well  recognized  to  permit  any  intelligent  defence ; 
but  what  did  railways  achieve  during  and  after  such  dissensions  ? 
Their  gross  tonnage  records  on  the  traffic  involved,  usually  fluctu- 
ated within  such  narrow  limits  as  to  surprise  the  contestants  when 
the  battle  and  accounts  were  cleared ; but  the  gross  revenues 
were  more  affected,  and  the  net  incomes  in  yet  greater  and  more 
wrongful  proportions.  Every  wrong  so  indicated  to  the  trans- 
porter and  the  forwarder  could  have  been  avoided  by  unity,  con 
ference  and  arbitration. 

These  private  and  railway  contentions  would  have  resulted  in 
earlier  corporate  and  public  evils  but  for  the  civil  war  and  the 
enormous  growth  of  traffic  and  railways  which  ensued ; but 
after  the  business  collapse  of  1873  those  evils  thrived  with  new 
vigor  until  they  culminated  in  1876  and  1877  in  a prolonged 
railway  war  to  secure  the  lesser  tonnage  moving,  and  in  a contest 
of  New  York  against  Baltimore,  which  time  has  proven  was 
needless.  Unjust  discriminations  and  preferences  increased,  and 
disturbed  trade  in  the  same  localities.  Bailway  revenues  were 
squandered  in  folly,  not  competition,  and  combined  action  to 
arrest  this  condition  became  quite  as  much  a public  as  a railway 
need. 


0 


ORIGIN  AND  ORGANIZATION  OF  THE  TRUNK  LINE  COMMISSION. 

In  1877  these  causes  led  to  the  organization  of  a Railway 
Commission,  consisting  of  one  delegate  from  each  Trunk  Line, 
with  Mr.  Albert  Fink  as  Commissioner,  and  he  has  described  its 
formation  as  follows  : 

“ The  great  dissatisfaction  that  existed  in  1876  and  part  of 
“ 1877,  during  a prolonged  railroad  war,  wTill  be  remembered  ; 
“ and  also  the  efforts  made  by  the  Chamber  of  Commerce  of  this 
“ city,  and  their  call  for  State  and  National  legislation  to  put  a 
“ stop  to  a state  of  affairs  so  disastrous  to  the  commercial 
“ interests. 

“ In  July,  1877,  the  trunk  lines  carrying  the  westbound  traffic 
“ from  New  York,  recognizing  the  justice  of  these  complaints, 
“ and  each  unable  to  control  the  tariff  individually,  formed  an 
u association,  and  agreed  that  each  company  would  thereafter 
“ strictly  adhere  to  the  established  tariffs,  which  were  then  con- 
“ sidered  reasonable  and  just ; that  all  underbidding  on  the  part 
“ of  one  railroad  against  another  by  secret  rates  and  rebates 
“ should  cease ; that  no  unjust  discrimination  should  be  made 
“ between  shippers. 

“ For  the  purpose  of  better  carrying  out  this  object,  and  to 
“ remove  the  motive  for  underbidding  and  payment  of  rebates, 
“ an  amount  of  traffic  considered  equal  to  that  which  each  trunk 
“ line  would  carry  under  a maintenance  of  equal  rates  was  mutu- 
“ ally  conceded  to  each  company.  This,  however,  is  merely  a 
“ subsidiary  measure  of  no  importance  to  the  public,  the  only 
“ object  of  which  is  the  maintenance  of  published  tariffs.” 

The  purposes,  growth  and  scope  of  this  agreement  have  been  so 
assailed  that  I here  copy  its  preamble,  which  expresses  the 
essence  of  all  railway  “ pools  ” as  it  does  justice  to  the  railways : — • 

“ For  the  purpose  of  maintaining  reasonable  and  uniform  rates 
“ of  freight  to  all  shippers  and  of  preventing  unnecessary  and  in- 
“ jurious  competition,”  etc. 

To  this  organized  nucleus  and  purpose,  other  railways  were 
each  asked  to  send  one  delegate  for  co-operation.  This  aggre- 
gate delegation  is  called  the  Joint  Executive  Committee,  but 
if  Western  members  cannot  attend,  they  depute  members  on 
the  Trunk  Line  Executive  Committee  to  act  for  them,  which 
therefore  becomes  a Standing  Committee.  These  Committees 
consider  multifarious  freight  and  passenger  questions  arising  over 
a vast  area  and  tonnage,  aud  among  diverse  and  antagonistic  as- 


7 


well  as  harmonious,  carrying  and  public  interests.  With  the  phe- 
nomenal railway  and  tonnage  growth  of  the  nation,  the  sub- 
jects and  issues  thus  presented  and  acted  upon  could  not  be 
treated  in  the  old  ways  described  without  a babel  of  trade  and 
railway  confusion. 

Mr.  Fink  was  made  chairman  of  both  these  committees  to  secure 
neutral  rulings  and  recommendations.  If  any  member  declines 
his  rulings  or  advice,  arbitration  then  decides  the  appeals. 

The  public  at  first  sight  has  little  concern  in  the  personnel  of 
such  Boards,  but  it  has  much  interest  when  private  or  geograph- 
ical rights  are  involved.  Therefore,  to  give  even  to  railway  arbitra- 
tion a semi-public  character,  Mr.  Charles  Francis  Adams,  Jr.,  an 
able  student  of  the  railway  problem,  who  did  most  to  make  the 
Massachusetts  Railway  Commission  the  model  State  railway 
organization,  was  chosen  by  the  railways  as  their  Arbitrator.  In 
the  same  spirit,  and  under  this  same  abused  “pool,”  Hon.  A.  Gr. 
Thurman,  Hon.  E.  B.  Washburne,  and  Hon.  T.  M.  Cooley  were 
chosen  by  the  railways  as  an  Advisory  Commission  to  determine 
the  relative  differences  in  rates  between  Baltimore  and  New 
York.  Those  amicable  conclusions  never  could  have  been 
readied  under  old  railway  methods  and  antagonisms. 

The  proceedings  of  these  various  committees  are  published  and 
sent  to  all  their  members.  There  is  no  secrecy  about  their 
deliberations.  The  statistics  are  furnished  daily,  weekly, 
monthly  and  annually.  The  arguments  before  the  Board  are 
printed,  and  its  decisions  are  published.  The  newspapers  publish 
their  material  action  as  rapidly  as  they  act,  and  public  senti- 
ment reacts  promptly  on  the  slightest  cause. 

The  ivestward  New  York  commission  was  originally  composed 
of  four  trunk  lines,  but  now  includes  the  LackawTanna  and  West 
Shore  routes,  six  railways  in  all.  It  terminates  with  the  trunk 
lines  proper,  at  Lake  Erie  and  the  Ohio  River,  and  no  railway 
beyond  them  is  bound  by  its  westward  action.  Boston,  Philadel- 
phia and  Baltimore  are  organized  on  the  same  basis.  The  Erie 
Canal,  the  routes  via  New  London  and  Ogdensburg,  the  Chesa- 
peake and  Ohio,  and  the  Virginia  and  Tennessee  and  Memphis  and 
Charleston  railway  routes,  are  not  parties  to  it,  and  never  have 


8 


been,  and  all  these  competing  routes  but  the  canal  are  contin- 
uously competitive. 

The  four  trunk  lines  had  been  opened  over  twenty  years  when 
they  so  organized.  Their  relative  positions  through  those  years 
of  railway  war,  harmony,  weakness,  power  and  preference,  were 
represented  by  the  proportions  in  which  the  public  had  delivered 
its  tonnage  to  each.  No  money  purses,  penalties  or  forfeits  were 
provided,  but  each  company  agreed  to  make  actual  transfers  of 
the  tonnage  it  received  in  excess  of  its  agreed  or  awarded  percent- 
age, to  the  roads  in  deficit,  on  the  order  of  Mr.  Fink,  who  kept  the 
records.  January  1,  1884,  it  was  further  agreed  that  for  ton- 
nage not  so  transferred,  an  amount  per  ton  equal  to  about  twenty 
per  cent,  of  the  Chicago  rate  on  the  same  class  should  be  paid 
into  a fund,  from  which  it  would  be  refunded  when  the  company 
paying  had  turned  over  the  actual  freight,  but  that  payment  is  a 
purely  secondary  purpose  and  obligation. 

The  eastward  Trunk  Line  association  does  not  yet  include  the 
Lackawanna  or  West  Shore  by  percentages,  but  does  include  the 
Grand  Trunk,  so  there  are  but  five  parties  to  it,  and  under  it  the 
eastbound  tariff  rates  are  lower  to-day,  with  navigation  not 
opened,  than  ever  before  at  this  season.  If  they  are  not  harmon- 
ious rates,  it  proves  that  competition  is  not  stopped  by  federated 
railway  organization.  If  they  are,  the  Commission  must  have 
due  credit  for  them.  There  are  other  eastbound  associations 
organized  upon  principles  identical  with  those  described,  but 
only  from  Chicago,  St.  Louis  and  Cincinnati.  Eastbound  traffic 
from  Louisville,  Indianapolis,  Peoria,  Cleveland,  Toledo,  Detroit, 
Milwaukee,  etc.,  etc.,  is  not  yet  divided,  and  that  fact  is  one  of 
the  causes  of  the  weakness  and  instability  of  reasonable  rates.  At 
present,  only  about  twenty-five  per  cent,  of  the  eastbound  traffic 
which  comes  to  the  Trunk  Lines  is  divided  from  its  starting 
points  in  any  form  of  u pool,”  and  much  of  that  fraction  is  not 
apportioned  on  the  intermediate  lines ; as,  for  example,  the 
Cleveland,  Columbus,  Cincinnati  and  Indianapolis  Pailway  has 
no  “ pool  ” upon  the  St.  Louis  or  Louisville  traffic  it  carries. 

TRAFFIC  UNITY  HAS  REDUCED  RATES  AND  INCREASED  TONNAGE. 

The  foregoing  are  the  objects  and  organization  of  the  Com- 
mission frankly  displayed.  What  has  it  accomplished  as  to  rates  ? 


9 


When  it  went  into  effect  the  rates,  in  cents  per  100  pounds, 
from  New  York  to  Chicago,  on  which  all  others  are  based,  as 
hereinafter  shown,  were : 

Glasses. 


1 

2 

3 

4 

5 

special. 

In  1877 

. . 100 

80 

60 

45 

. . 

Highest  tariff  since . . . . 

, . . 75 

60 

50 

40 

35 

30 

Lowest  tariff  since . . . . 

. . 45 

32 

26 

19 

. . 

Present  tariff 

. 75 

60 

45 

35 

25 

Corresponding  reductions  have  been  made  from  every  Atlantic 
coast  city,  and  from  interior  points  as  well.  Large  and  small 
merchants  in  all  trades  in  all  parts  of  the  country,  have  there- 
fore secured  lower  westward  rates  by  this  railway  co-operation  in 
an  average  of  25  per  cent.  Large  reductions  have  been  made 
eastwardly  in  the  same  period,  as  follows : 

Chicago  to  New  York.  Classes. 


1 2345678 

In  July,  1877 120  90  70  70  70  70  25  20 

Present  rates 100  85  70  60  50  45  20  15 


The  general  tendency  of  traffic  organization  to  reduce  rates, 
is  farther  noticeable  and  proven.  The  Southern  Pailway  Asso- 
ciation, organized  nine  years  since,  has  reduced  first-class  rates 
from  New  York  to  Atlanta,  from  1.70  per  100  pounds  in  1875  to 
1.14  at  this  time. 

The  Southwestern  Pailway  Association,  between  Chicago  and 
Kansas  City,  elc.,  has  reduced  rates  in  five  years,  from  35  cents 
on  grain  to  20  cents  at  this  time. 

A yet  broader  comparison  shows  that  in  1880  the  average  rate  in 
New  York  State  was  0.9  of  one  cent  per  ton  per  mile.  In  Belgium 
it  was  1.65  cents;  in  France  1.5  cents;  in  Prussia,  about  2 cents, 
and  in  England,  about  double  that  of  New  York.  Can  mere 
abstract  attacks  on  traffic  unity  because  it  is  publicly  called  a 
“ pool,”  and  not  against  actual  beneficial  results,  answer  this  inter- 
national proof  that  our  rates  are  both  limited  and  reasonable  ? 

A further  important  fact  as  to  rates  in  all  sections  of  the 
country,  is  that  there  is  no  fixed  or  apparent  relation  between  a 
railway  company’s  stocks  and  bonds,  and  its  charges  for  transpor- 
tation. 


10 


There  is  not  an  important  railway  in  any  of  the  traffic  federa- 
tions I have  cited,  that  has  not  added  junior  mortgages,  deben- 
tures, or  floating  debts  to  its  payable  obligations,  while  it  has 
reduced  rates.  The  general  public  has,  in  every  case,  largely  bene- 
fited by  the  certainties  of  lessened  charges,  while  the  railway 
investor  or  speculator  has  taken  the  uncertainties  of  losses  and 
profits  on  their  securities.  Northern  Pacific  preferred  may  drop 
from  par  to  45,  or  advance  again  to  90,  but  the  cost  of  the  prop- 
erty remains  the  same,  and  its  freighters  pay  steady  or  descend- 
ing rates,  lower  than  ever  before  to  and  from  Oregon,  although 
that  railway  is  in  the  California  “pool.” 

“No  well-informed  man  now  brings  charges  of  extortion  against 
“ the  railroads  of  the  country  as  a whole,  or  against  pooled  lines. 
“ * * * Pools  certainly  do  not  encourage  extor- 

“ tion.  In  nearly  every  instance,  complaints  now  preferred  relate 
“ to  discriminations  against  individuals  or  against  local  traffic.” — 
St.  Louis  Globe-Democrat , September  1 9,  1883. 

The  westbound  tonnage  from  New  York  in  1878,  the  first  entire 
3^ear  of  the  “pool,”  wras  715,808  tons,  which  was  increased  to 
1,198,097  tons  in  1881,  and  in  1882,  to  1,363,708  tons,  or  it  has 
nearly  doubled  in  five  years.  Clearly  the  Trunk  Line  organ- 
ization benefited  New  York  commerce  if  results  confirm  anything. 

This  unity  has  aided  other  seaboard  cities  and  preserved 
their  relative  geographical  and  therefore  their  individual  rights. 
The  gross  Boston  tonnage,  westbound,  which  was  147,065  tons 
in  1878,  increased  under  the  “pool”  to  335,814  tons  in  1882. 
Interior  New  England  points  increased  in  the  same  time  from 
34,946  tons  to  106,897  tons,  and  Philadelphia,  which  forwarded 
212,798  tons  in  1879,  increased  under  the  operation  of  the 
equities  I have  detailed,  to  320,082  tons  in  1S82. 

GEOGRAPHICAL  DISCRIMINATIONS  STOPPED  BY  CO-OPERATION. 

Traffic  unity  has  done  yet  more  to  lessen  geographical  dissen- 
sion, which  intensifies  personal  discriminations,  for  if  all  merchants 
in  a district  are  treated  fairly,  as  compared  with  those  in  another 
section,  personal  wrongs  in  both  localities  will  more  rapidly  dis- 
appear. By  bringing  together  in  a Joint  Executive  Committee, 
railways  representing  all  sections  and  interests,  mutual  concessions 
have  taken  the  place  of  arbitrary  and  sectional  views,  wrongs 


11 


have  been  admitted  and  rectified,  unequal  practices  made  uniform, 
and  in  no  other  way  could  so  many  good  results  have  been 
achieved. 

Mr.  Charles  S.  Smith,  of  the  New  York  Chamber  of  Commerce, 
said  pools  “ utterly  abrogate  what  little  'protection  there  is  for  the 
“ public  in  the  natural  competition  of  the  various  cities Let  us 
dissect  this  statement : 

The  largest  through  railway  traffic  passes  between  New  York 
and  Chicago,  and  the  most  direct  and  best  organized  rivalry  of  water 
to  rail  is  between  the  same  points.  The  rates  between  those  cities 
are,  for  these  combined  reasons,  laid  first,  on  all  classes  and  in 
both  directions,  as  the  corner-stones  of  the  whole  edifice  of  united 
rates.  Every  rate  between  New  York  City  and  every  point  east 
of  the  Pacific  is  then  based  in  some  manner  on  those  rates  to 
Chicago,  either  by  a percentage  of  the  Chicago  rates,  as  distances 
are  greater  or  less  than  the  Chicago  distance,  or  by  adding  the 
arbitrary  rates  of  local  roads  that  decline  to  prorate,  to  the 
rates  on  this  Chicago  basis  to  the  nearest  points  that  do  prorate. 

Every  through  rate  under  “ pool  ” influence  westward,  is  then 
made  the  same  from  Boston  as  from  New  York,  and  less  by  fixed 
differences  from  Philadelphia  and  Baltimore  than  from  New 
York.  The  present  rate  on  sugar  from  New  York  to 
Chicago  is  25  cents  per  100  pounds,  and  from  Philadelphia  to 
Indianapolis  it  is  but  22  cents.  At  25  cents,  there  is  direct  water 
rivalry  the  entire  distance  ; at  22  cents,  there  is  none  for  any 
part  of  the  distance  ; yet  both  are  made  by  rail  as  if  both  encount- 
ered like  water  competition.  The  latter  should  not  be  lower  than 
the  former  on  mere  competitive  rules,  but  it  is  so  under  the  fede- 
rated system  of  geographical  equalizing.  If  any  local  or  national 
procedure  can  be  fairer,  simpler,  or  make  rates  more  reasonable, 
will  some  respondent  say  what  it  should  be  ? 

Again,  the  Baltimore  and  Ohio  Company  demands  lower 
rates  from  the  west  to  Baltimore  than  to  New  York,  in  order  to 
equalize  its  shorter  rail  distance  with  its  longer  ocean  carriage. 
Although  the  rail  route  to  Baltimore  does  not  compete  with 
water,  while  to  New  York  it  does,  nevertheless  fair  geographical 
and  distance  rights  are  conceded  to  every  interior  point  as  com- 
pared with  Chicago  in  the  west,  and  to  Baltimore  and  Philadel- 


u.  Of  ILL  LIB. 


12 


phia  as  compared  with  New  York  in  the  east,  and  this  other  broad 
principle  is  adopted  into  the  general  rate  basis  eastward. 

Although,  therefore,  a great  tonnage  goes  from  New  York 
to  Chicago  and  but  a few  cases  of  thread,  for  example,  from 
Willimantic,  Conn.,  to  Dayton,  Ohio,  the  latter,  as  a purely  inland 
transaction,  gets  every  benefit  of  the  former  which  is  reduced 
by  water  limits  ; and  this  inland  or  local  geographical  parity,  has 
been  achieved  under  and  by  virtue  of  the  same  co-operative  ton- 
nage agreements. 

The  co-operative  system  of  traffic  distribution  further  recog- 
nizes the  competition  of  carriers  to  the  same  points  because  it 
has  removed  no  stimulus  that  each  endeavor  to  secure  its  full 
competitive  share  of  tonnage  at  equal  rates.  If  they  do  not  do 
so  their  percentages  may  be  reduced.  This,  however,  induces  every 
company  to  secure  business  by  the  best  methods  and  facilities 
rather  than  by  paying  drawbacks ; and  if  the  money  wasted  in 
needless  rebates  in  the  past  ten  years  had  been  invested  in  judi- 
cious betterments  and  improvements,  as  the  legitimate  right  arms 
of  true  competition,  the  public  would  have  had  great  and  perma- 
nent benefits,  instead  of  great,  if  transient,  evils.  The  construction 
of  new  roads  and  the  new  control  of  old  roads  are  also  recognized 
as  factors  entitling  the  controlling  line  to  the  increased  traffic  they 
bring  it,  and  reducing  at  the  same  time,  in  proper  proportions,  the 
tonnage  of  the  older  lines  from  which  they  divert  traffic. 

Co-operative  organization  also  encourages  competition  at  rival 
cities.  How  long,  for  example,  would  the  Pennsylvania  Railroad 
continue  indifferent  to  its  Philadelphia  city  interests,  merely 
because  it  might  make  more  gross  money  from  the  longer  haul  of  a 
larger  tonnage  pooled  at  New  York?  A stronger  reason  is  that 
the  Pennsylvania  Railroad  Company  now  carries  69  per  cent,  of 
the  tonnage  from  Philadelphia,  and  about  27  per  cent,  from  New 
York,  and  the  Baltimore  and  Ohio  Company,  which  takes  70  per 
cent,  of  the  Baltimore  tonnage,  carries  less  than  10  per  cent,  from 
New  York.  Aside,  therefore,  from  questions  of  State  and  city 
traditions,  pride  and  ownership,  which  States  and  cities  will  not 
permit  those  railways  to  ignore,  the  railways,  from  motives  of 
self  interest,  exert  their  best  powers  in  behalf  of  the  cities  from 
which  they  receive  the  largest  percentages  of  tonnage  and  revenue. 


13 


The  same  reasoning  would  apply  to  the  Grand  Trunk  at  Montreal 
and  the  Chesapeake  and  Ohio  at  Richmond,  if  they  were 
“ pooled.” 

RAILWAYS  AND  FORWARDERS  PROTECTED  AND  EQUALIZED. 

This  organization  has  furthermore  stopped  discriminations  by 
railways  against  railways,  curbed  the  stronger,  protected  and 
encouraged  the  weaker  lines,  and  thus  retarded  the  growth  of 
railway  and  personal  monopoly. 

The  sensible  advocates  of  unified,  co-operative,  inter-dependent 
management  recognize  the  fact  that  no  railway  can  be 
wiped  out.  Once  built  and  a rival,  always  a rival ; once  to 
carry  any  tonnage,  is  always  to  carry  some  tonnage.  It  is  not  a 
question  whether  the  new  carrier  was  needed,  it  is  there  under 
the  law  ; its  construction  may  have  been  most  unwise,  bank- 
ruptcy may  follow  it  and  others,  but  it  is  there.  The  bankrupt 
individual  goes  away  or  sinks  into  business  oblivion,  but  the 
bankrupt  railway  is  often  noisier  and  more  hurtful  than  if  solvent,, 
because  it  stays  there  and  always  competes.  If  the  laws  stimulated 
its  construction  against  old  lines,  the  same  laws  and  the  old  lines 
owe  it  reasonable  recognition  afterward. 

A new  railway  therefore  always  divides  the  business  at  its  com- 
mon points  with  the  older  companies,  in  some  proportions  at  some 
rates,  and  usually  with  small  variations  when  its  traffic  powers  are 
finally  in  efficient  and  vigilant  effect.  That  is  all  any  “ pool  ” can 
do,  and  railway  co-operation  recognizes  such  facts  in  order  to 
accomplish  fair  results  through  the  avenues  of  discretion  and  not 
discord,  and  through  equities  instead  of  enmities.  The  result  is 
always  better  for  every  interest  involved,  and  the  better  the  faith 
the  better  the  result. 

Let  us  suppose  two  cases.  In  each  a new  railway  is  built 
through  an  important  point  before  local  to  one  older  railway. 
In  one  case  a foolish  contest  ensues,  outlined  herein.  In  the 
other,  co-operative  unity  is  established  at  reasonable  standards 
of  rates  having  due  relation  to  other  points.  The  older  line 
concedes  one-third  the  traffic  to  the  new  comer,  which  the  new 
line  agrees  to  accept. 

The  shippers  who  seek  to  break  such  agreements  find  in 
going  from  one  to  the  other  railway,  that  both  are  steadfast  and 


14 


fair  to  themselves  and  the  public,  their  rates  are  alike,  their  regu- 
lations similar,  their  deliveries  equally  prompt,  and  all  without 
preferential  rates  or  favors,  and  the  forwarders  and  receivers 
soon  buy  and  sell  upon  those  ascertained  certainties. 

If  cars  are  lacking  on  one  line  the  rival  supplies  them,  if  a flood 
or  accident  occurs  to  one  route,  the  uninterrupted  line  replaces 
it,  and  the  public  has  two  co-operating  instead  of  antago- 
nistic lines,  honestly  serving  a common  community  of  traffic 
with  the  increased  facilities,  which  under  this  system  they 
can  afford  to  provide.  At  the  same  time  adjacent  localities  are 
not  injured,  nor  are  their  trades  or  industries  attacked  or  diverted 
by  higher  local  rates. 

What  matters  it  then  to  forwarders  into  what  shares  or  in  what 
manner  the  railways  divide  that  traffic  ? There  must  be  a point 
where  the  rates  are  reasonable,  there  must  be  a division  of  trade 
that  is  fair  to  both  railways  and  patrons,  and  the  railways  must 
each  secure  both  tonnage  and  money  in  some  proportions,  for 
neither  will  ever  leave  the  locality. 

If  rates  and  facilities  are  the  same,  why  should  shippers  prefer 
one  road  to  the  other,  unless  it  be  to  concentrate  on  the  one,  in 
order  to  break  down  the  rates  of  both.  If  they  thus  foster 
strife  or  prefer  a given  route,  they  should  pay  for  that  preference, 
or  divide  their  business  fairly  between  both  railways  rather  than 
publicly  antagonize  one  or  both  of  them. 

The  minor  advantages  of  uniform  classifications,  fullness 
of  statistics,  prompt  settlements  at  connecting  points,  expediting 
the  traffic,  the  adjustments  of  responsibilities  for  losses  and 
damages  resulting  from  this  harmony,  also  form  an  essential  and 
large  aggregate  of  valuable  mercantile  security. 

Can  there  be  any  reasoning  business  or  legislative  doubt, 
which  of  the  two  courses  thus  outlined  best  prevents  the  wrongs 
of  railway  against  railway  and  preferential  discriminations  between 
persons  and  localities,  if  the  rates  are  reasonable  ? 

These  organizations  have  been  far  from  perfect,  and  there  has 
been  much  bad  faith  under  them  that  would  however  have  been 
worse  without  them  ; but  they  have  cured  many  ills,  and  the  more 
nearly  they  can  be  made  like  this  illustration  of  "unity,  the  more 


15 


surely  they  will  correct  those  wrongs  that  yet  exist  within  and 
despite  their  better  intents. 

The  associated  railways  between  the  Missouri  river  and  Chicago 
afford  another  striking  illustration.  H o section  has  grown  so  rapidly 
in  material  values ; nowhere  have  so  many  carriers  successfully 
united  to  furnish  in  effect  one  system  of  railways  at  like  rates  for 
-a  vast  commerce.  No  section  is  more  sought  by  the  emigrant  and 
by  capital ; nowhere  have  discriminations  been  fewer ; nowhere 
have  railways  been  more  promptly  built  to  develop  the  arable 
domain  with  excellent  facilities ; nowhere  do  new  farm 
lands  command  higher  prices ; nowhere  is  agricultural  labor 
better  rewarded ; nowhere  have  manufacturing  interests  increased 
more  rapidly,  and  nowhere  have  investments  in  railways  been 
more  creditable,  stable  and  profitable.  Their  rates,  although 
annually  reduced  in  the  average,  are  yet  higher  than  usual  else- 
where ; but  the  rapidity  of  development  and  accrued  riches  under 
them,  proves  that  they  have  not  been  unreasonable,  but  have 
rendered  value  for  value,  which  is  the  essence  of  all  rates  and  their 
reasonableness,  and  not  mere  “ cost  of  service,”  which  is  the  new 
anti-railway  slogan. 

COOPERATION  DOES  NOT  PREVENT  INDEPENDENT  ACTION. 

My  next  point  is,  that  the  Joint  Executive  organization 
does  not  prevent  proper  individual  independence.  More 
than  half  its  members  represent  railways  that  do  not 
divide  any  class  of  business,  they  have  no  contracts  with  the 
others  which  do,  and  they  can  leave  the  organization  on  notice. 
They  are  as  free  now  as  wEen  joint  railway  affairs  were 
considered  by  old  methods,  to  cut  rates,  discriminate  and  dis- 
organize if  they  so  elect,  and  some  of  them  unfortunately  still 
do  it,  as  wdtness  the  present  unprofitable  eastward  through  rates. 

The  organization  may  nowr  require,  however,  that  they  shall 
confine  their  quarrels,  losses  and  wrongs,  to  their  own  proper- 
ties and  patrons.  If  a railway  from  Peoria  to  Chicago,  for 
example,  has  a fighting  grievance  against  a local  rival,  it  has  no 
right  to  cut  rates  all  the  way  to  the  seaboard  cities,  making  others 
pay  say  ninety  per  cent,  of  the  loss,  bringing  down  the  rates 
everywhere  else  at  the  same  time,  under  the  geographical  scale 
before  stated,  and  involving  millions  of  property  it  does  not  own. 


16 


I cite  in  this  connection  the  course  recently  pursued  by  the  Lack- 
awanna Company  from  New  York.  That  Railway  opened 
through  in  October,  1882,  but  did  not  join  the  Executive  organi- 
zation until  January,  1884.  In  those  fifteen  months,  it  cut  the 
agreed  rates  to  the  extent  that  when  it  joined  the  Commission 
it  had  registered  many  hundred  special  westbound  contracts, 
generally  at  “ Twenty  per  cent,  off  tariff,”  meaning  any  tariff. 
Some  ran  “ to  the  opening  of  navigation,”  some  to  July,  others 
to  May,  others  to  August,  and  others  were  at  specific  rates.  All 
were  preferential  and  discriminating,  both  as  to  localities  and 
persons,  because  they  were  a percentage  below  any  tariff  that 
might  be  fixed,  and  therefore  involved  no  elements  of  cost, 
value  or  reasonableness.  If  the  other  lines  reduced  their  rates, 
the  same  percentages  were  still  to  be  taken  off.  They  were 
secret,  unlawful,  and  adverse  to  sound  railway  and  public  policy. 
Such  rates  could  only  be  adjusted  by  concealed  drawbacks,  they 
injured  every  trader  who  did  not  get  them  and  every  railway 
that  did,  and  they  reanimated  old  skeletons  that  were  buried  in 
1877,  it  was  hoped,  forever.  By  what  right  of  equity  or  compe- 
tition did  that  Company  attack  the  reasonable  revenues  of  its 
rivals ; and  by  what  other  right  could  it  reduce  the  rates  all 
the  way  to  St.  Louis.  Surely  the  Wabash  Railway  should  have 
no  preferential  interest  in  a contest  east  of  Buffalo,  and  it 
was  its  neutral  and  public  duty  to  charge  the  disturbing  line 
which  sought  to  reduce  its  revenues,  at  least  as  much  as  the  New 
York  Central  was  paying  it  for  the  same  service. 

H.  B.  Claflin  & Co.  have  a right  to  sell  their  own  goods  at  any 
prices  they  elect ; but  they  have  no  right  to  enter  the  counting- 
room  of  Arnold  & Constable,  and  sell  the  latter’s  goods  at  the 
same  prices,  without  the  consent  of  that  firm. 

Neutral  carriers  should  therefore  require  of  all  their  connec- 
tions reasonable  and  uniform  rules  and  rates ; parallel  railways 
are  entitled  to  know  why  their  reasonable  rates  are  attacked 
and  reduced,  and  if  they  are  reduced  on  public  grounds,  the 
public  should  know  what  those  grounds  are. 

In  this  Lackawanna  case  the  co-operative  trunk  lines  had  two 
alternatives: — to  convince  the  assailant  of  its  wrong,  or  re-enact 
railway  follies  and  wars.  They  finally  achieved  the  former  just 


17 


purpose,  and  I challenge  disproof  of  the  railway  and  public  wis- 
dom of  both  the  federated  and  assenting  roads. 

Mark  another  striking  contrast  in  farther  proof : The  New  York, 
West  Shore  and  Buffalo  Railway  opened  January  1,  1884,  and 
having  arbitrated  the  share  of  westward  traffic  to  which 
it  was  entitled  from  New  York,  secured  at  least  its  rights,  while 
maintaining  those  of  the  public  to  equal  rates.  Can  there  be  any 
doubt  which  of  those  contrasted  policies  was  most  genuinely  in 
the  public  as  well  as  the  railway  interest  ? 

HOW  TRAFFIC  FEDERATIONS  ARE  MISUNDERSTOOD. 

This  indispensable  and  beneficial  railway  federation  is  antago- 
nized in  the  views  quoted  below,  which  represent  an  important 
aspect  of  public  fallacy  and  prejudice. 

A body  that  should  be  as  intelligent  as  the  New  York  State 
Railway  Commission,  says  in  its  last  report : 

“ The  pooling  contract  which  originated  with  the  four  trunk 
4i  lines  in  June,  1877,  has  since  been  extended  so  that  the  system 
41  now  embraces  thirty-seven  of  the  principal  railroad  corporations 
“ in  the  United  States.  It  has  been  found  so  profitable  and  the 
■“  power  of  the  lines  confederated  into  the  pool  over  outside  lines 
4t  is  so  compulsory,  that  all  of  them  in  the  end  must -unite  with 
46  the  pool.” 

This  statement  is  full  of  errors. 

Mr.  Chittenden’s  speech  at  Washington,  January  29,  1884, 
said : 

“ This  pool  commenced  in  1877.  It  was  then  a contract 
46  between  the  four  trunk  lines  centering  in  New  York.  It  has 
“ grown  and  stretched  out  its  arms  and  increased  until  it  now 

embraces  certainly  more  than  forty  of  the  principal  railroads 
46  in  this  country.  There  is  in  New  York  City  an  equipped 
“ and  organized  pool  government.  It  has  its  Executive  Commit- 
46  tee  of  the  Trunk  Lines,  its  Executive  Committee  of  the  Pool, 
“ and  another  Executive  Committee  composed  of  one  member 
“ from  each  pooling  railroad.  It  has  a board  of  arbitration 
46  intended  to  take  the  place  of  the  judiciary.  Over  it  all  is 
“ the  emperor,  the  Commissioner  Mr.  Fink,  who  to-day  exercises 
“ a power  for  good  or  evil  over  the  commerce  and  products  of 
4t  this  country  greater,  not  only  than  that  of  any  of  his  contempo- 
“ raries,  but  greater  than  any  man  ever  before  exerted  in  the 
“ United  States  of  America.  He  and  his  imperial  organization 
■“  are  as  independent  of  the  law  as  it  is  possible  for  man  or  State 


18 


44  to  be,  and  the  whole  charter  or  contract  which  binds  these  forty 
44  roads  into  this  one  copartnership  and  confederation,  judged  by 
44  the  principles  of  the  common  law,  is  as  unlawful  and  as  much 
44  against  public  policy  * * * as  the  Louisiana  State  Lottery 

44  or  any  other  similar  institution,  which  is  confessedly  without 
44  the  pale  of  the  common  law.” 

There  is  a strikingly  similar  passage  in  Cervantes  : 

44  As  they  were  thus  discoursing,  they  discovered  some  thirty 
44  or  forty  wind  mills  that  are  in  that  plain,  and  as  soon  as  the 
44  Knight  had  espied  them,  * * * cried  he  : 4 Look  yonder, 

44  friend  Sancho ; there  are  at  least  thirty  outrageous  giants 
44  whom  I intend  to  encounter,  and,  having  deprived  them  of 
44  life,  we  will  begin  to  enrich  ourselves  with  their  spoils,  for  they 
44  are  lawful  prize,  and  the  extirpation  of  that  cursed  brood  will 
44  be  an  acceptable  service  to  Heaven.’  ” 

44  4 What  giants  V quoth  Sancho  Panza. 

44  4 Those  whom  thou  see’st  yonder,’  answered  Don  Quixote 
44  4 with  their  long  extended  arms.  Some  of  that  detested  race 
44  have  arms  of  so  immense  a size,  that  sometimes  they  reach  two 
44  leagues  in  length.’  ” 

Disregarding  the  obvious  retort,  most  of  the  errors  of  these 
mere  assertions  have  been  dissipated  by  what  has  preceded,  and 
it  only  remains  to  notice  the  falsity  touching  the  powers  given 
the  Commissioner. 

Mr.  Fink  is  in  no  sense  an  44  emperor.”  He  cannot  affect  the 
value  of  44  commerce  and  the  products  of  this  country  ” to  the 
extent  of  one  dollar.  He  never  has  advanced  and  cannot  advance 
any  rate  in  America  one  cent , because  the  rate  making  and  chang- 
ing power  remains  jealously  where  it  always  has  been.  Even  his 
power  of  reducing  rates  exists  solely  in  lowering  all  rates  to  the 
basis  of  discovered  cuts,  on  demand  of  an  accusing  trunk  line, 
as,  witness  the  present  eastward  through  rates.  He  has  not  as 
much  control  over  rates  as  any  one  of  a thousand  freight  agents 
in  all  parts  of  the  country.  He  is  amenable  to  all  law,  common 
or  charter,  that  touches  any  man,  and  his  voice,  influence  and 
efforts  are  unmistakably  and  continuously  in  aid  of  giving  non- 
discriminating public  effect,  to  the  common  law  principle  of  the 
equality  of  reasonable  rates  under  substantially  similar  conditions. 
If  that  be  44  without  the  pale  of  common  law”  it  is  the  law’s, 
dishonor  and  the  44  pool’s  ” honor. 


19 


PUPLIC  OPINION  BEGINS  TO  FAY OB  KAIL  WAY  UNITY. 

That  approving  views  of  this  unity  are  rapidly  gaining  ground 
with  the  just  and  intelligent  public  I fully  believe.  I here 
copy  recent  general  utterances  favorable  to  “ pools,”  the  more 
significant  in  that  they  are,  I believe,  generally  from  sources  that 
at  one  time  opposed  them. 

“ They  have  brought  about  a change  for  the  better  from  that 
“ which  prevailed  before  the  pooling  arrangements  were  made.” 
—Simon  Sterne , Counsel  New  York  Board  of  Transportation. 

“ The  pooling  of  traffic  has,  as  already  stated,  secured  a certain 
“ degree  of  public  favor  from  the  fact  that  where  honestly  and 
a effectively  carried  out,  it  has  proved  to  be  instrumental 
“ * * in  putting  a stop  to  that  vicious  form  of  discrimination, 

“ special  rates  to  favored  shippers,  usually  the  largest  shippers, 
“ and  in  greatly  reducing  that  most  objectionable  of  all  practices, 
“ discrimination  against  commercial  and  industrial  towns  and 
“ cities — and  against  States  and  localities.” — Joseph  Nimmo , Chief 
of  the  Governmental  Bureau  of  Statistics. 

Pooling  “ certainly  has  good  points  for  shareholders  and  the 
“ public.  It  does  prevent  to  some  extent  unjust  discriminations 
“ — it  aims  to  treat  all  alike.” — Charles  S.  Smith , Chairman  Trans- 
portation Committee , New  York  Chamber  of  Commerce. 

“ The  pool  * * * is  the  friend  of  peace  and  as  such 

u unalterably  opposed  to  war.  It  does  not  destroy  com- 
petition * * * but  rather  restrains  competition  within 

“ reasonable  bounds.  The  pool,  moreover,  is  as  invaluable  to  a 
“ shipper  as  it  is  to  the  railroad,  for  while  by  the  maintenance  of 
“ rates  it  insures  to  the  latter  profitable  returns  to  the  share- 
“ holders,  to  the  former  it  insures  equality  of  treatment  with 
“ others  of  his  kind,  by  fixed  and  unvarying  schedules.”- — New 
York  Commercial  and  Financial  Chronicle , 1883. 

“ Pools  certainly  do  not  encourage  extortion.  * * * In  so 

“ far  as  pool  commissioners  base  their  operations  on  the  import- 
“ ance  of  overcoming  favoritism,  they  command  genuine  respect.” 
— St.  Louis  Globe-Democrat , 1 884. 

“ With  an  assured  basis  of  this  character,  merchants  could  give 
“ their  exclusive  time  and  attention  to  a wholesome  development 
“ of  trade,  instead  of  as  now,  spending  a large  portion  of  their  val- 
u uable  time  in  hunting  up  the  agent,  who  is  liable  to  give  the 
“ inside  figures.” — u Large  Shipper  ” in  Indianapolis  Journal , 
1884. 

“ The  pooling  agreement  of  the  great  trunk  lines  was  intended 
“ to  guarantee  to  the  public  a fixed  and  uniform  schedule  of 


20 


“ rates.  * * * The  war  of  rates  certainly  shows  the  evil  of 

“ unregulated  competition  between  rival  railroad  lines.  * * * 

“ The  continuation  of  such  competition  could  only  result  in  dis- 
“ aster,  first  to  the  weakest  line,  then  to  the  next  weakest,  and  so 
“ on  until  only  the  strongest  survived.  The  final  result  of  such 
“ a process  of  evolution  would  be  absolute  monopoly.” — New 
York  Times. 

A railway  pool  “ is  an  agreement  among  them  for  each  to 
“ accept  its  share  of  the  competitive  business  at  a moderately  re- 
“ munerative  rate  common  to  all.” — Professor  Atwater , of  Prince- 
ton College. 

“ Railway  pools  should  not  be  abolished,  they  should  rather  be 
“ carried  further  and  perfected.  Finally,  they  should  be  taken 
“ possession  of  by  the  government,  and  without  losing  sight  of 
“ the  rights  of  stockholders  and  creditors,  managed  by  it  in  the 
“ interests  of  the  people.  ” — Writer  in  Chicago  Tribune , March , 
1884. 

“ The  pool  operates  to  prevent  unreasonable  and  unfair  dis- 
“ crimination  and  favoritism  between  shippers.  * * * The 

“ pool  which  fixes  reasonable  rates  and  prevents  disastrous  wars 
“ of  rates,  thus  promotes  public  interest  in  an  adequately  service- 
“ able  and  efiicient  system  of  internal  transportation.” — Chicago 
Times , March,  1884. 

u Railways  have  made  foreign  commerce  profitable  by  creating 
“ markets  for  imports  and  by  providing  return  cargoes  in  agricul- 
“ tural,  mining,  and  manufacturing  exports.  They  have  added 
“ directly  to  the  wealth  of  the  whole  country  and  of  every  citi- 
u zen.  While  doing  this  work,  they  have  steadily  reduced  their 
“ transportation  rates,  until  on  the  rates  of  1880,  as  compared 
“ with  those  of  1866,  they  have  saved  to  the  producer  and  con- 
“ sumer  a sum  equivalent  to  one  cent  per  ton  per  mile,  which, 
“ on  the  freight  moved  in  1880,  amounted  to  more  than 
“ $323,000,000.  A monopoly  which  can  accomplish  such  results 
“ ought  certainly  to  be  considered  a beneficent  monopoly.” — C. 
Stuart  Patterson , in  Princeton  Revieiv. 

“ There  has  not,  for  near  two  years,  been  a single  complaint 
“ made  to  this  office.  Our  people  are  at  peace  with  the  railways, 
“ as  much  so  as  any  people  in  the  Union.  Our  courts  afford  a 
“ remedy  against  discriminations  and  rebates.” — H.  Sabine , Com- 
missioner of  Raihvays  for  Ohio,  in  letter  dated  February  21, 1884. 

The  purpose  of  this  article  is  to  aid  in  extending  this  public 
opinion  and  state  railway  peace  to  inter-state  traffic,  to  do  which, 
requires  as  much  the  national  aid  to  accomplish  it  nationally, 
as  it  required  state  aid  to  secure  it  in  the  commonwealth  of 
Ohio. 


21 


WHAT  THE  PUBLIC  IS  ENTITLED  TO  ASK  OF  RAILWAYS. 

In  defending  the  co-operative  railway  unity  which  is  thus 
beginning  to  command  the  approval  of  the  public,  I do  not  ask 
that  the  protection  of  its  great  transportation  interests  be  left  entirely 
to  that  agency.  There  will  always  be  honorable  railway  officers 
who  demand  the  consideration  of  the  public  interest  from  high 
motives,  and  others,  who  perhaps  take  the  more  sordid  view,  that 
in  protecting  public  interests  they  add  to  their  own,  but  even 
both  considerations,  added  to  the  powerful  water  and  trade  limi- 
tations hereinafter  cited,  may  not  act  as  adequately  and  continu- 
ously as  they  should. 

Conceding,  therefore,  Lord  Coke’s  apothegm  that  “ railways  are 
“ affected  with  a public  interest,”  and  to  Judge  Nelson,  that  they 
“have  public  duties  to  perform,”  the  public  is  entitled  to  ask: 

First. — That  all  railway  freight  rates  be  reasonable. 

Second .= — That  they  shall  not  be  unduly  discriminating  or 
preferential  as  between  persons  or  localities  for  substantially  like 
transactions. 

Third. — That  proper  freight  tariffs,  together  with  the  defensi- 
ble and  just  commercial  concessions  from  them,  be  given  such 
publicity  as  to  prevent  the  unjust  abuse  of  the  just  principle. 

Fourth. — That  all  attempts  to  evade  any  of  the  foregoing 
public  requirements,  by  concealed  or  other  drawbacks  or  prefer- 
ences should  be  legally  prevented. 

All  just  commercial  railway  grievances  fall  within  some  of 
those  admitted  boundaries. 

Upon  these  various  heads — and  first , as  to  reasonableness. 

If  success  in  “ pools  ” stimulates  railway  avarice  or  wrong  to 
charge  more  than  is  reasonable,  the  national  legislature  can  surely 
consider  and  reduce  interstate  “pool”  rates  as  legally,  quickly  and 
effectively  as  it  can  any  other  “ contract  between  railways  to 
establish  rates  which  is  not  pooling.” 

It  is  not  pertinent  to  this  article  to  discuss  what  “reasonable 
rates  ” are.  They  vary  so  much  in  different  parts  of  the  country 
and  with  seasons,  grades,  quantities,  articles,  risks  and  values,  that 
no  rule  can  be  formulated.  I only  insist  in  passing  that  “cost  of  car- 
riage ” cannot  decide  it.  Any  carrying  service  is  clearly  worth 
its  value  to  the  buyer  rather  than  to  the  seller  of  transporta- 


22 


tion,  because  the  buyer  does  not  pay  unless  he  uses  the  railway, 
for  a venture  which  he  alone  decides,  while  the  railway  having 
completed  its  line,  and  spent  its  money,  must  bear  the  risks  of 
non-use,  and  is  therefore  entitled  to  more  than  cost  in  any  event, 
when  it  is  used,  otherwise  some  part  of  its  services  is  a public 
gratuity  which  no  one  can  require.  “ The  difference  between 
“ what  a product  is  worth  and  what  it  has  cost  is  sometimes  quite 
“ large.” 

An  able  French  writer  on  transportation  has  said  : 

“ The  cost  of  production  ■ * * * is  only  one  element  of 

“ the  value”  “ An  article  of  transportation,  like  every  article  of 
“ goods  and  like  every  service,  has  a value.  * * * We 

“ should  pay  for  it  not  what  it  costs  hut  what  it  is  worth  .” 

Clearly,  however,  the  legitimate  and  commercial,  or  preferen- 
tial and  monopoly  considerations  wdiich  decide  good  and  bad 
railway  management  to  charge  this  or  that  reasonable  or  unreason- 
able rate,  as  also  railway  greed,  rapacity  and  stock  jobbing,  are 
each  and  all  as  deciding  and  forceful  when  charges  are  fixed  by 
mere  agreements  upon  rates  alone,  as  when  rates  and  all  other 
questions  are  settled  by  co-operative  traffic  unity.  What  differ- 
ences can  exist  either  of  motive  or  opportunity  ? 

1 go  farther,  and  railway  history  will  prove  that  hasty  con- 
ferences u to  merely  establish  rates  ” usually  result  in  the  higher 
charges  because  the  parties  feel  that  they  will  try  them  and  can 
speedily  change,  if  they  cannot  maintain  them.  Under  well- 
digested  co-operative  agreements  intended  to  be  permanent, 
rates  receive  more  careful  consideration  from  points  of  public  as 
well  as  railway  view.  Most  railway  disturbers  will  also  make 
secret  rates  under  temporary  agreements,  at  which  they  would  hesi- 
tate in  long-continuing  “ pool  ” contracts  which  should  not  and  can- 
not avoid  publicity  in  their  essentials,  and  never  in  their  charges. 
If  parties  to  these  plastic  agreements  to  establish  rates,  have  smould- 
ering intents  to  use  them  to  cloak  rebates,  or  seize  another 
railway’s  patrons,  they  are  sure  to  advocate  high  charges,  because 
their  alphabet  is,  that  the  higher  tariff  rates  are,  the  more  money 
they  can  retain  after  they  pay  the  drawbacks. 

The  same  men,  in  perfecting  equitable  unity  intended  to  be 
lasting,  and  framed  to  secure  and  keep  all  the  revenues  agreed 


23 


to  be  charged,  will  make  the  first  rates  lower  than  otherwise, 
because  if  they  are  uniformly  maintained,  the  railways  will  yet 
net  more  money,  than  from  higher  nominal  rates  depleted  by 
those  secret  allowances  which  all  traffic  organization  is  intended  to 
prevent. 

CAUSES  PREVENTING  EXTORTION  BY  “ POOLS.5'’ 

But  the  logical  inquirer  into  this  problem  often  asks  : “ What  is 
to  prevent  you  from  strengthening  and  enlarging  your  combination 
so  that  unreasonable  rates  wfill  be  enforced.” 

To  this  admittedly  fair  question  I answer  : — 

It  has  not  yet  been  done,  but  on  the  contrary,  many  prominent 
reductions  in  rates  have  been  shown.  There  is  less  general  business 
to  carry  now  than  in  1882,  and  two  new  Trunk  railways  to 
■carry  it,  the  Lackawanna  and  West  Shore.  If  the  Trunk  Line 
Commission  were  an  extorting  monster  and  no  reasonable  facts 
or  considerations  limited  its  charges,  it  would  advance  them 
so  that  each  of  the  old  lines  would  get  as  much  money  from  its 
reduced  tonnage,  as  it  received  before  the  new-comers  depleted 
its  larger  traffic,  but  no  advance  in  rates  has  been  made  from  that 
cause. 

The  restraining  force  of  public  opinion,  and  respect  for  the 
common  and  statute  law,  operate  upon  railway  traffic  management 
with  more  power  than  is  popularly  known  or  believed.  Railways 
dislike  to  create  public  issues  as  to  their  charges,  and  do  much 
more  to  avoid  than  stimulate  them,  and  I refer  in  confirmation  of 
this  averment  to  every  State  Railway  Commission  in  the  Union. 
Railways  co-operate  with  and  concede  to  them  far  more  than  they 
antagonize  or  dissent  from  them. 

The  people’s  interests  are  protected  by  the  water  ways.  Senator 
Windom  said  to  the  Senate,  in  June,  1878,  after  his  Committee 
had  laboriously  studied  this  subject : 

“ The  chief  instrumentalities  by  means  of  which  those  (com- 
“ petitive)  forces  will  exert  their  power  are  the  Mississippi  river 

on  the  one  side,  and  the  northern  water  routes  on  the  other. 

Each  is  needed  to  regulate  the  other  and  both  are  regulators  of 
“ railway  charges.” 

Mr.  Fink  says  : “ To  destroy  competition  railway  pools  must  be 

able  to  accomplish  the  following  feats  : 

First — “ They  must  fill  up  the  Erie  canal. 


24 


Seco?id — “ They  must  dry  up  the  northern  chain  of  lakes. 

Third — “ The  sources  from  which  the  Mississippi  and  other 
“ navigable  rivers  derive  their  waters  must  he  stopped  ; and 

Fourth — “ The  sun  must  be  extinguished  and  the  evaporation 
u and  condensation  of  water  prevented.” 

And  I add  that  the  tides  must  cease  and  oceans  be  sponged 
away. 

Let  us  suppose,  however,  that  the  participants  in  the  Re w York 
organization  intended  to  charge  unreasonable  rates.  They  would 
be  controlled  by  the  Erie  canal  and  St.  Lawrence  river  and  the 
great  lakes,  which,  in  their  seasons,  fix  surer  definitions  of  reason- 
able rates  than  can  Congress  or  juries.  The  ocean  never  ceases 
its  competitive  tides  ; the  Isthmus  route  limits  rates  to  the  Pacific 
coast ; and  the  Ohio,  Missouri,  Tennessee,  Cumberland,  Illinois, 
Red,  Arkansas  and  Mississippi  rivers  do  not  “ pool,”  except  with 
Rep  tune  when  they  reach  the  Delta. 

This  nation  has  about  35,000  miles  of  these  rival  and  free  water 
routes,  over  five-sevenths  of  it  always  active,  and  the  remainder 
abnormally  active  in  seven  months  to  secure  a year’s  result,  and 
these  exceptional  transportation  safeguards  are  more  potent  and 
protective  than  law  or  armor.  The  whole  constitutes  the  arterial 
rate  governing  system  from  the  producing  and  trading  heart  of 
the  nation  to  its  circumference.  The  laws  of  tides,  currents  and 
seasons  cannot  be  surmounted  or  evaded  by  puny  railway  agree- 
ments or  combinations.  Natural  limitations  bind  railway  rates  down 
inflexibly ; they  are  the  true  anti-monopolists,  the  legislators* 
security,  and  the  public  defense  against  the  menace  of  organized 
excess  on  the  vast  majority  of  our  tonnage  movement* 
The  proof  of  their  value  lies  in  the  unchallenged  fact  that  our  rail 
rates  average  lower  than  any  similar  rail  transit  in  the  world. 
With  the  constant  improvements  of  watercourses  at  vast  national 
cost,  in  some  instances  by  legislators  who  vote  river  and  harbor 
appropriations,  yet  attack  the  railroads,  the  average  railway  rates 
of  the  country  are  reduced  annually  and  can  never  rise  above  this 
imperious  and  imperishable  natural  competition. 

Finally,  on  this  point  I wish  to  set  out  in  bold  relief 
the  fact  that  rates  are  and  always  must  be  made,  within 
and  in  pursuance  of  organized  railway  unity,  from  precisely  the 


same  causes  and  within  the  same  limitations  that  would  operate 
with  equal  force  if  no  “ pools  ” existed.  If,  for  example^ 
wheat  is  selling  in  Chicago  at  one  dollar  per  bushel  and  in  New 
York  at  one  dollar  and  ten  cents  per  bushel,  no  “ pool  ” that  can  be 
conceived  would  secure  its  railway  movement  at  a rate  of  twenty 
cents  per  bushel,  or  twice  the  mercantile  margin ; and  if  corn 
freights  and  charges,  by  lake  and  canal,  from  Chicago  to  New 
York,  are  ten  cents  per  bushel,  the  most  adroit,  monopolistic  and 
extortionate  “ pool  ” that  can  be  concocted,  cannot  charge  fifteen 
cents  per  bushel  for  its  rail  transit.  Traffic  unity  assures  the 
public  in  its  interest,  that  if  say  twelve  cents  per  bushel  is 
reasonable  and  can  be  maintained  by  rail,  no  railway  or  forwarder 
shall  be  wronged  by  a secret  rate  of  less  amount. 

In  the  face  of  these  universal  transportation  facts,  the  talk  of 
national  railway  extortion  by  u pools,”  or  the  ordinary  cliameleon- 
hued  “ agreements  which  are  not  pools,”  is  meaningless,  idle  and 
unintelligent,  or  it  is  insincere.  Exactly  to  the  contrary,  they 
have  reduced,  equalized  and  rendered  reasonable  and  non-prefer- 
ential,  every  rate  they  have  established  or  influenced,  when 
carried  out  simply  in  good  public  and  railway  faith. 

EQUALITY,  PUBLICITY  AND  UNIFORMITY  OF  KATES. 

The  second  point  granted  was  that  i^tes  should  not  be  pre- 
ferentially discriminating  as  between  persons  or  localities  for  sub- 
stantially like  transactions,  and  I ask  if  such  preferences  and  dis- 
criminations are  more  likely  to  exist  under  “ pools  ” than 
without  them  ? The  railway  history  of  the  country  under  the  two 
systems,  as  inadequately  and  unfaithfully  as  freight  federations 
have  been  observed  and  tested,  utters  the  answer  plainly,  and 
all  the  reasoning  and  facts  herein  urged  fortify  the  public  under 
them  against  the  wrongs  they  suffered  before  they  had  them,  and 
so  conclusively  that  there  is  no  longer  need  to  even  discuss  the 
opposite  view. 

The  third  point  conceded  was  proper  publicity  of  tariffs  and 
changes  in  them,  as  well  as  the  scales  of  allowances,  if 
any,  made  to  manufacturers  of  crude  materials,  intended  to 
reappear  in  finished  forms ; such  as  lumber  into  furniture  ; 
ores  into  castings  and  forgings ; cotton  into  fabrics ; grain  into 
flour,  etc.,  etc. 


26 


Such  concessions  are  world-wide  and  defensible,  are  calculated 
do  develop  industry  and  stimulate  thrift,  and  traffic  unity 
would  make  them  reasonable,  public  and  uniform.  Primarily 
it  may  be  no  part  of  a railway’s  functions  to  exercise  these  mer- 
cantile offices,  but  if  it  passes  through  coal,  limestone  and  iron 
ore,  yet  does  nothing  to  interest  its  own  and  other  capital  and 
labor  to  develop  them,  it  is  no  less  a railway  than  a public 
loss.  Without  such  railway  stimulation  and  aid  many  a town, 
prosperous  to-day  in  its  industry  and  peaceful  in  its  homes, 
would  be  only  a rocky  hillside  or  a fallow  meadow. 

I cordially  sustain  the  fourth  point — that  concealed  drawbacks 
and  allowances  creating  inter-state  and  discriminating  results, 
should  be  forbidden  by  law,  except  that  such  prohibition  should 
not  interdict  defensible  commercial  allowances. 

To  illustrate : The  government  refunds  internal  revenue  taxes 
first  paid  on  whisky  exported,  by  a rebate  defensible  on  national 
grounds.  I similarly  maintain  not  only  the  equity,  but  the 
national  need  of  a fair  export  railway  drawback  from  fair  rates, 
if  this  country  could  not  otherwise  command  a proper  share  of 
the  grain  markets  of  England  against  the  rivalry  of  India  or 
Odessa.  If  a fixed  rate  on  grain  from  Chicago  be  30  cents  per 
100  pounds  to  consumers  in  New  York  City,  and  that  rate  is 
reasonable  per  se , it  is  no  undue  discrimination,  if  a fair  part  of  that 
charge  be  necessarily  refunded  upon  proof  of  export  to  London. 
The  one  rate  pushes  American  cereals  into  markets  they 
could  not  otherwise  maintain,  and  the  other,  although 
higher,  gives  our  own  people  the  cheapest  bread  stuffs  in  the 
world.  That  is  defensible  railway  and  public  wisdom,  if  the 
allowances  are  uniform  and  have  publicity  with  other  rates  and 
regulations.  When  the  government  waives  its  charges  to  aid 
the  export  of  whisky,  although  foreigners  may  perhaps  for  that 
reason  drink  it  cheaper  than  we  can,  it  is  not  called  national  dis- 
crimination, but  protection  or  encouragement. 

Beyond  such  just  allowances  on  public  and  fair  scales,  I believe 
that  all  other  inter-state  drawbacks  or  concealments  should  be 
Mopped  by  law . Next  to  such  law,  traffic  federations  can  and 
will  prescribe  just,  uniform,  and  universal  rules,  and  due  pub- 
licity ; and  the  railway  officers,  who  are  intelligently  and  fairly 


endeavoring  to  perfect  traffic  unity  in  that  spirit,  should  be  held 
as  reformers  stopping  public  abuses,  and  not  as  malefactors 
inaugurating  them ; but  both  federal  and  state  law  should  aid 
them,  as  it  aids  various  societies  for  the  prevention  or  suppression 
of  vice  and  crime. 

ALL  GREAT  INTERESTS  MUST  UNITE  AND  CO-OPERATE. 

To  Secure  all  the  advantages  thus  claimed  and  conceded, 
co-operative  railway  unity  is  indispensable,  if  we  may  judge  by  the 
logic  of  analogy.  We  already  have  various  State  governments,  in- 
dependent within  limits,  but  the  argument  would  be  preposterous 
which  said  that  national  control,  regulating  while  protecting  all,  is 
centralization  and  usurpation,  and  that  there  should  not  be  a com- 
mon Congress,  Departments,  Executive  and  Judiciary.  States  must 
respect  the  nation,  the  nation  the  States.  The  civil  war  decided 
those  civil  issues  precisely  as  rate  wars  led  railways  to  adopt  the 
analogy  of  the  general  government  in  carrying  on  their  local  and 
inter-state,  public  and  private  functions.  Chancellor  Kent  said  : 

u The  States’  origin  and  their  interests  wTere  the  same,  * * 

“ they  were  naturally  led  to  a very  intimate  connection,  and 
“ were  governed  by  the  same  wants  and  wishes,  the  same  sym- 
“ pathies  and  spirit.  * * A Congress  of  two  Commissioners, 

“ delegated  from  each  colony,  was  to  be  held  annually,  with 
“ power  to  deliberate  and  decide  on  all  affairs  of  wTar  and  peace, 
“ and  on  all  points  of  common  concern.” 

This  unassailable  policy  of  state  federation  by  and  within  the 
law,  secures  to  a nation  unity  and  international  respect,  and  gives 
us  one  flag.  The  nation  must  have  its  Congress  and  the  President 
his  executive  committee  or  cabinet,  as  the  heads  of  Departments. 
When  they  are  antagonistic,  business  suffers,  public  confidence  is 
undermined  and  deep  apprehensions  are  aroused.  A government 
with  each  department  pursuing  its  own  and  a different  policy 
would  be  justly  derided,  and  the  responsible  political  party  would 
be  displaced,  unless  the  President  promptly  performed  his  clear 
public  duty  and  disciplined,  or  dispensed  with,  the  malcontents. 

States  have  their  county  governments,  counties  their  muni- 
cipalities, and  municipalities  their  police,  and  every  profession, 
business,  charity  and  government,  must  concentrate  the  influences 
and  authority  needful  to  unify,  equalize  and  shield  its  different 


28 


interests.  Organized  stock  exchanges  are  indispensable  to  fiscal 
regulation  and  values,  produce  exchanges  and  boards  of  trade  to 
mercantile  prices  and  probity,  clearing  bouses  to  banks,  maritime 
exchanges  to  marine  enterprises,  chambers  of  commerce  to  unite 
varied  trade  influences,  etc.,  etc.,  and  they  are  all  legalized  trade 
helps  and  equalizers. 

Bank  and  insurance  examiners  are  deemed  essential  in  the 
public  interest  to  the  rigid  enforcement  of  sound  business 
principles,  conservative  methods,  and  the  preservation  of  corporate 
capital  unimpaired,  in  order  that  insurers  and  depositors  may  not 
lose  theirs.  Some  authority  must  exist  in  every  calling  that  is 
central,  respected,  definite  and  disciplinary,  and  that  is  recognized 
by  the  common  or  statute  law,  not  merely  as  permissive  but 
needful  public  safeguards  and  instrumentalities,  and  in  no  .other 
way  can  any  work  be  respected  or  respectable,  potent  for  good 
or  against  wrong,  or  make  its  results  salutary  and  forcible. 

When,  however,  railways  conform  to  these  universal  principles 
and  methods,  railway  legislation  and  commissions  not  only 
do  not  encourage  them,  but  they  do  not  hesitate  enough 
at  unsound,  hostile  and  depreciating  laws  and  orders,  which 
affect  unjustly  the  very  securities  on  which  many  callings  and 
charities  are  largely  founded. 

HOW  FOREIGN  GOVERNMENTS  HAVE  MET  THIS  PROBLEM. 

All  the  foregoing  facts  and  reasons  influenced  and  reflect  the 
conclusions  at  which  foreign  governments  arrived,  after  years 
of  futile  trial. 

Charles  Francis  Adams,  Jr.,  said,  in  his  report  of  1872,  as 
chairman  of  the  Massachusetts  Railway  Commission  : 

“ A more  thorough  unification  of  railroads  * * * would 
“ seem  to  be  an  universal  and  necessary  law  of  their  growth,  in 
“ Great  Britain  as  in  this  country.  The  tendency  at  one  time 
“ excited  great  public  alarm  on  political  considerations,  but 
“ Parliament  found  itself  wholly  unable  to  check  it.  In  Belgium, 
“ the  government  seems  to  have  made  no  effort  to  check  it,  while 
“in  France  and  Germany,  the  policy  has  been  to  encourage  it.” 

In  confirmation  of  this,  the  present  English  Clearing  House  act 
recites  the  advantages  of,  and  legalizes  railway  unity  as  follows : 

“ Whereas , For  some  time  past,  arrangements  have  subsisted 
“ between  several  railway  companies  for  the  transmission,  without 


29 


“ interruption,  of  the  through  traffic  in  passengers,  animals,  mine- 
u rals  and  goods  passing  over  different  lines  of  railway,  for  the 
“ purpose  of  affording  in  respect  to  such  passengers,  animals, 
u minerals  and  goods  the  same  or  like  facilities  as  if  sack  lines 
“ had  belonged  to  one  company , etc. ; and  Whereas,  The  clearing 
“ system  has  been  productive  of  great  convenience  to  the  public , 
a * * * but  considerable  difficulty  has  been  experienced  in 

“ carrying  into  effect  the  objects  of  the  association,  in  consequence 
“ of  the  committee  not  possessing  the  power  of  prosecuting  or 
46  defending  actions  or  suits,  or  taking  other  legal  proceedings , 
46  * * * be  it  enacted,”  etc.,  etc. 

Under  this  act,  Mr.  Gladstone  acted,  in  1857,  as  arbitrator,  “ or 
the  judiciary,”  to  divide  traffic  from  London  between  four  com- 
panies for  fourteen  years,  precisely  as  it  has  been  divided  from 
~New  York  in  a similar  but  localized  clearing  system  among  four 
roads  for  a shorter  period,  and  he  even  then  compared  favorably 
with  some  of  our  present  opponents,  as  a publicist,  statesman  and 
legislator. 

The  committee  of  the  German  Empire  reported,  prior  to  the 
purchases  of  its  main  railway  lines  by  that  government : 

“ The  uniting  of  the  property,  of  the  traffic  and  of  the  manage 
■“  ment  of  the  inland  main  lines  under  the  strong  arm  of  the 
<k  State,  are  the  only  efficient  and  proper  means  to  solve  the  task.” 
This  clearly  is  a governmental  “ pool.” 

Of  France,  Mr.  Adams  said,  in  1872  : 

“ The  companies  do  not  profess  to  compete,  and  the  entire 
“ country  is  districted  and  no  rivalries  are  'permitted  within 
“ assigned  territories.” 

This  is  the  most  absolute  “ pool.” 

Belgium  has  purchased  the  principal  private  lines  in  its  borders, 
corporate  rivalry  has  ceased,  and  the  government  has,  in  effect, 
“ pooled  ” all  its  railway  receipts. 

Can  the  unity  or  “ pools,”  which  have  proved  so  desirable  as 
governmental  measures  in  so  many  nations,  be  wrong  as  an 
American  railway  measure  if  the  rights  of  its  citizens  and  rail- 
ways are  similarly  and  equally  protected  ? Assuredly  the  question 
carries  its  own  answer,  and  it  only  remains  to  say  how  the  rights 
of  both  can  be  so  protected. 


30 


GOVERNMENTAL  SANCTION  ADVOCATED. 

To  that  end  I re-advocate  what  I said  at  Washington  in  March, 
1882,  more  heartily  than  it  was  first  uttered  : 

“ I have  no  hesitation  in  recording  the  conviction,  that  if  the 
“ government  of  the  United  States  would  give  legal  effect,  like 
“ England,  to  the  association  of  American  railways,  now  organized 
“ under  the  title  of  the  Joint  Executive  Committee,  or  to  their 
“ Board  of  Arbitration,  by  which  it  might  prosecute  or  be  prose- 
“ cuted  and  defend,  and  thus  give  the  national  sanction  and  a 
“ semi-public  character  to  the  federation  of  the  companies,  the 
“ unity  of  their  management,  and  the  uniformity  of  their  rates, 
“ and  then  further  enact  the  appointment  which  I shall  urge 
u later  on,  of  a national  railway  commission  to  co-operate  with  and 
“ not  oppose  this  recognized  committee,  then  the  unreasoning 
“ public  clamor  which  now  seeks  the  enactment  of  hostile  rail- 
“ way  legislation  unknown  to  the  world,  would  not  only  cease  but 
“ be  entirely  harmonized  in  the  unquestioned  public  satisfaction 
“ that  would  follow.” 

If  this  view  were  conceded,  the  national  transportation  interest 
would  be  reduced  to  a homogeneous  and  legalized  whole,  perform- 
ing the  carrying  needs  of  a vast  and  growing  people  and  com- 
merce,with  that  contrasted  equity  which  the  following  illustrates  : 

The  charges  for  carrying  the  mails  on  star  routes  have  bred 
public  scandal  and  wrong,  because  there  was  no  rule  of  uniformity 
in  basis,  action  or  compensation,  and  there  was  too  much  freedom 
given  to  subordinate  individual  judgment  and  action,  as  is  the  case 
when  railway  wrongs  thrive  most.  No  one  hears  of  discrimination, 
evil  or  scandal  from  the  railway  charges  to  the  government  for 
carrying  the  same  or  any  mails  because  they  are  based  on  uniform 
and  conference  rules,  rates  and  payments ; and  the  postage  charges 
of  the  government  are  in  their  turn,  alike  and  non-discriminating 
to  all  users  of  like  privileges.  If  the  government  controlled  the 
railways  it  w^ould  be  required  to  adopt  the  same  principle  of  uni- 
form and  non-preferential  freight  charges,  and  would  enforce 
them  by  its  universality  and  power.  Why  then  should  not  the 
same  government,  encourage  and  enforce  railway  agreements  look- 
ing to  precisely  the  same  desirable  results  under  corporate  man- 
agement ? 


31 


RAILROADS  WOULD  BE  UNITED  IF  UNDER  GOVERNMENT  CONTROL. 

If  the  government  purchased  the  railways  of  the  country,  as 
many  advocate,  the  central  and  unifying  power  over  them 
would  dwell  at  Washington  in  a Govermental  Kailway  Direction, 
Commission,  Executive  Committee  or  Board.  The  Director  of 
the  Northwestern  system,  from  Chicago  to  St.  Paul,  would  be 
directed  to  desist  from  attacks  on  the  Omaha  system  ? If  the 
Directors  of  Railways  for  New  England  assailed  the  Department 
of  New  York,  or  the  Department  of  the  Mississippi  surreptitiously 
diverted  the  trade  of  the  Department  of  the  Ohio  by  unequal 
rates,  preferences  or  inducements,  the  authorized  national  power 
would  admonish  the  assailing  and  protect  the  assailed  officers  and 
districts. 

It  would  be  needful  for  it  to  reconcile  and  adjust  international 
carrying  agreements  with  Canada  and  Mexico ; and  as  essential 
that  it  harmonize  local  but  competing  interests  within  one  state, 
as  through  rates  between  many  states  and  territories. 

All  the  receipts  from  governmental  railway  traffic  would  surely 
go  into  one  and  the  general  government  purse  or  “ pool,”  com- 
petition would  be  ended  and  forbidden,  as  it  is  in  the  postal  ser- 
vice; discriminations  would  cease,  as  in  the  collection  of  duties  and 
taxation,  but  the  gross  receipts  would  require  to  be  apportioned 
to  this  or  that  railway  or  department,  as  they  are  now  in  the  mail 
service  and  revenue  and  land  departments  and  their  sub-divisions, 
in  order  to  show  the  incomes,  expenses,  profits,  efficiency,  honesty 
or  dishonesty  of  administration,  etc.,  etc.,  of  each. 

If  no  adequate  powers  to  these  essential  ends  existed  in  the  laws, 
Congress  would  promptly  enact  the  requisite  legislation,  and  con- 
ferences between  the  Departmental  managers  would  necessarily 
be  called  at  Washington  to  avoid  such  strife,  and  shape  intelligent, 
uniform  and  harmonious  national  railway  action. 

The  present  railway  Executive  Committee  does  not  go  beyond 
a similar  focus  of  action,  but  seeks  to  achieve  it  through 
co-operative  unity  of  management,  and  impartial  arbitration. 

Could  railways  be  managed  in  any  other  than  this  essentially 
co-operative  and  unified  way  by  the  government,  and  if  not,  why 
is  the  problem  easier  to  individuals  possessing  less  power  ? 


32 


Railway  agreements  relating  to  inter-state  traffic  should  there- 
fore be  hied  with  a National  Railway  Commission  and  the 
United  States  District  Attorneys,  and  the  latter  should  be  re- 
quired to  take  action  in  the  United  States  Courts  upon  verified 
complaints  of  their  violation  to  an  extent  requisite  to  enforce 
uniform  reasonable  charges,  both  against  each  railway,  and  shippers 
that  sought  or  knowingly  accepted  preferential  inter-state  rates. 
Such  agreements  would  then  be  so  cautiously,  conservatively 
and  impartially  drawn,  and  the  public  would  be  so  well  pro- 
tected within  and  without  them,  that  most  of  the  railway  ills  of  the 
nation  would  disappear  like  the  “ fabric  of  a vision  ” under  such 
legal  supervision  and  public  scrutiny.  Under  railway  contracts 
so  legalized,  while  publicly  watched  and  guarded,  honest  railways 
or  forwarders  could  cite  others  to  legally  establish  like  honesty 
of  purpose  and  action  and  stop  unjust  practices,  although  but  few 
cases  would  ever  be  permitted  to  reach  that  issue.  When,  how- 
ever, courts  enforce  other  contracts  and  the  Constitution  guar- 
antees their  inviolability,  why  should  railway  agreements  in  the 
interest  of  public  equality  and  reasonableness  be  exceptions,  merely 
because  they  provide  at  the  same  time  for  railway  equality  and 
reasonableness  ? 

If  such  national  sanction  as  to  inter-state  agreements  could  be 
supplemented  by  the  like  confirmation  by  States  as  to  competition 
within  their  limits,  there  is  no  question  whatever,  that  the  just 
mean  of  public  and  railway  protection  would  be  reached  and 
remain  assured. 

SIMILAR  TRADE  ORGANIZATIONS  LEGALLY  PROTECTED. 

The  “New  York  Clearing  House  Association”  is  a voluntary 
non-chartered  and  non-incorporated  federation  of  sixty-three 
banks,  organized  in  1853,  representing  a vast  capital.  Its  clear- 
ances in  1882  were  $41,862,148,453,  or  fifty-four  times  as  much 
as  the  gross  receipts  of  the  railways  of  the  Union  in  the  same 
year,  which  were  $770,356,716.  It  has  a Manager  and  five  com- 
mittees, including  one  for  arbitration.  Its  Constitution  says  its 
object  is  “ the  effecting  at  one  place  of  the  daily  exchanges  be- 
“ tween  the  several  associated  banks  and  the  payment  at  the  same 
“ places  of  the  balances  resulting.” 


This  banking  pool  ” has  proven  its  great  and  conservative 
value  as  a barrier  to  financial  avalanches.  It  aided  the  govern- 
ment in  the  crisis  of  its  war  finance,  and  has  introduced  and  sus- 
tains stable,  uniform  and  conservative  banking  methods. 

If  the  banks  of  one  city  require  this  unity,  do  not  railway 
interests  yet  more  require  “ the  effecting  at  one  place  of  the  daily 
“ exchanges  between  the  several  associated  ” railways. 

The  New  York  Stock  Exchange  has  a constitution,  by-laws, 
rules,  orders,  penalties  and  an  executive  committee.  Its  rulings 
determine  what  securities  may  be  properly  admitted  and  quoted, 
and  its  rates  of  commission  may  not  be  cut  by  its  members.  Its 
regulations  are  enforced  by  the  courts  and  its  members  are  ex- 
pelled who  violate  them.  It  is  legally  protected  in  a mere  joint- 
stock  organization  which  makes  varying  fiscal  charges  for  railway 
bonds  and  shares,  while  agreements  by  railway  corporations  to 
secure  stable  and  non-discriminating  carrying  charges  are  declared 
“ without  the  pale  of  law.” 

The  Produce  Exchange  of  New  York  is  a chartered  corpora- 
tion, under  the  title  of  the  “ New  York  Commercial  Association.” 
Its  rules  enforce  honorable  dealing  between  its  members,  it 
has  twenty-five  committees,  beside  a Complaint  Committee 
and  a Board  of  Arbitration,  and  its  receipts  are  pooled  for  the 
common  good  of  its  members.  When  the  railways  seek  to  give 
the  transportation  element  in  the  same  articles  traded  in  upon  its 
floor  legal  permanence  and  equality  by  similar  organization, 
committees  and  rules,  the  people  and  Congress  are  loudly  told  it 
is  a railway  conspiracy  and  should  be  opposed  in  the  public 
interest. 

The  fact  that  either  of  these  two  latter  bodies  are  not  infrequently 
used  by  speculators  to  wrong  the  public,  does  not  detract  from 
their  legality  or  their  great  aggregate  usefulness  and  value. 

A proper  u New  York  Bailway  Association  ” for  similar  pur- 
poses is  even  more  essential  to  its  own  business  and  its  pub- 
lic value,  than  these  and  other  trade  Exchanges,  because  the 
railways  in  some  manner  relate  to,  or  carry  the  traffic  of  them  all. 
A railway  officer  who  lias  signed  agreements  and  rules  to  maintain 
fair  rates  intact  in  such  an  association,  yet  violates  his  faith,  pays 
surreptitious  drawbacks,  and  creates  unlawful  preferences,  is  too 


84 


frequently  displayed  as  a public  benefactor,  his  act  credited  to 
legitimate  competition  and  liis  treachery  encouraged,  when  he 
would  be  expelled  from  the  floor  of  either  of  the  exchanges  named 
for  similar  action  touching  a private  agreement.  It  is  a fact 
that  a merchant  who  may  use  his  every  personal  endeavor 
to  break  a railway  agreement,  will  render  judgment  as  an  officer 
of  an  Exchange,  against  any  one  who  breaks  any  other  rule  or 
covenant  on  its  floor. 

CONCLUSION. 

Congress,  the  States  and  trade  organizations  should,  therefore, 
firmly  discountenace  theories  that  encourage  and  perpetuate  corpo- 
rate contention  in  the  interests  of  stronger  against  weaker  persons 
and  railways,  and  which  in  that  view  clearly  foster  individual  and 
corporate  monopoly.  The  services  of  the  railways  in  creating 
national  wealth,  by  thrusting  our  products  into  new  markets, 
in  equalizing  the  valleys  of  the  Susquehanna  and  the  Missouri, 
in  bringing  the  earth’s  resources  down  all  the  human  avenues 
to  industry,  and  constantly  cheapening  their  charges  for  doing  all 
this,  surely  entitle  them  to  a nation’s  kindness  rather  than  its  kicks. 

Legislation  has  not  done  this,  “ pools  ” have  not  thwarted 
or  delayed  it,  monopoly  has  not  prevented  it,  extortion 
has  not  surmounted  it,  neither  have  congressional  penalties  nor 
immunities  hastened  it,  but  the  unaltered  and  unalterable  laws  of 
human  industries  and  interests,  and  the  ceaseless  equalizing  of  tides 
and  streams  have  secured  it.  The  country  therefore  owes  to  rail- 
ways conservative  protection  against  radical  assaults ; and  their 
co-operative  traffic  federations,  which  are  intended,  within  just 
limits,  to  secure  uniformity,  stability  and  impartiality  among  rail- 
ways, their  patrons  and  the  States,  should  be  reinforced,  ratified 
and  legalized  by  an  intelligent  public  conviction. 

G.  R.  BLANCHARD. 


) 


